Management and Organizational Studies 3370A/B Chapter Notes - Chapter 11: Statistical Process Control, Quality Costs, Quality Control

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Barry Hawn

Document Summary

Companies that use jit require their suppliers use sophisticated quality control programs such as statistical process control, and certify the parts they deliver are free of defects. Internal failiure costs: result from identification of defects during appraisal process, scrap, rejected products, reworking of defected units, downtime, appraisal activities typically focus on symptoms rather than on causes and do nothing to reduce defective items. External failiure cost: when a defective product is delivered to a customer, warranty repairs and replacements, product recalls, liability from legal action, lost sales. Distribution of quality costs: when quality of conformance is low, total quality cost is high, due to internal and external failiure cost, as company spends more on prevention and appraisal, percentage of defective units drop. Balance scorecard may include the total quality cost. Uses of quality cost information: quality cost information helps managers see the financial significance of defects.